The new Starbucks-Square mobile payments partnership is an opportunity for Twitter and Facebook (FB) to leverage their developing mobile ad platforms, geo-targeting features and itinerant user base into transaction gold.
The question is not if, but how soon?
The convenience connection recognized by Starbucks (SBUX) CEO Howard Schultz and Jack Dorsey, co-founder of both Square and Twitter, in their new partnership lacks the social component to move the proposition beyond the initial infatuation with using smartphone technology to pay for lattes.
Social networks increasingly influence behavior and thinking. The social commerce movement is already in full swing with the likes of Shoedazzle, goodreads, and the celebrity-driven shopping service OpenSky. Of course, Dorsey gets that and will likely facilitate social connections with Twitter and others. That social momentum will grease the skids for a mobile payment and commerce explosion.
Twitter, Facebook and other social networks are under pressure to monetize that social engagement, more of which is occurring on the go. Some companies such as American Express (AXP) already have a vibrant social component on Twitter and its Open Business website. With more than one quarter of Americans using mobile social networks this year (largely in Facebook and Twitter), according to eMarketer, businesses are seeking to take their brand page presence and marketing there to the next level—and that means transactions.
Square could develop its own full-blown social app—but why would it, when it can expand its reach through the largest and most immediate networks gearing up for mobile marketing and commerce battle? Leveraging the information garnered in the social process (such as recommendations, insights into where and when consumers shop, and their "likes") will result in more organic advertising and commerce experiences.
The targeted marketing of products and services to individuals when they are most likely to need, want and be receptive to them is bound to be more successful than pushing out more traditional generic advertising in the hopes that someone out there will respond.
Tracking Starbucks customers with their Square mobile transactions and the coffee vendor's existing mobile payments has the potential for other marketing and transaction opportunities in the same locale, all of which can be amplified by making it a virtually shared, social experience.
The smartphone payments are just the tip of the iceberg. Other area merchants can get in on the act, tipped off by geo-targeting on where smartphone users are headed. Notified friends could receive an electronic coupon for a discounted Starbucks mid-to-late afternoons.
The mobile social combination makes it frictionless and fun. "The stuff finds you!" observes Lou Kerner, a social media analyst turned investor who just launched a fund for buying primary and secondary shares of young mobile social companies climbing in the space. Kerner's Social Internet Fund is providing a way for the founders, employers and angel investors of rapidly growing social and mobile companies, generally worth $25 million to $500 million, to achieve some early-stage liquidity. Kerner is betting that these companies will contribute to a period "of the greatest wealth creation we have ever seen."
Starbucks' Schultz believes in this potential of mobile pay enough to invest $25 million in the new partnership and his own time on the Square board behind this early attempt to change how commerce happens. Square is poised to as much as double its $6 billion in annual transactions as the result of its new Starbucks ties.
Players as powerful and diverse as Google (GOOG), GroupOn (GRPN), Microsoft (MSFT) and Sprint (S) are jockeying for position in the mobile wallet space. But Twitter and Facebook Mobile have the heft in the social mobile sweet spot. Twitter has the corner on immediacy and universal reach; Facebook, on more personalized connections and they are all determined to invade each other's space.
The big data generated by every social mobile commerce move will have ramifications for reshaping all businesses.
Walmart is one major retailer already tying its inventory orders and marketing to the chatter on Facebook and Twitter about what consumers want and plan to buy. The company will likely move into in-store smartphone checkout, coupons and comparison shopping with remote friends and experts by Christmas 2013—not unlike the new system Starbucks and Square announced, Kerner said in an interview.
Although the Starbucks-Square is more evolutionary than revolutionary, the blue chip player's endorsement will propel mobile commerce forward, faster, and likely integrate it with social mobile dynamics already reshaping the marketplace experience.
The key will be organically incorporating commerce and advertising into consumers' routine and spontaneous activities on their mobile devices and in the physical world—whether that's playing a virtual game, posting a photo, texting or buying a latte.